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With all the negative and positive commotion surrounding the Crypto market – it still begs the question, for those still curious. What does it take to engage in the trading of Cryptocurrency?
And by trading, we are not referring to the price speculation in a portfolio as one would with the price of a company’s shares or even CFDs.
We are rather referring to trading it as a commodity against other ‘Cryptos’ in a properly regulated online market setting. Similar to how a Foreign Exchange (Forex) market operates.
As with trading traditional fiat currencies, the price is purely determined by good old supply and demand for the currency and monitored by the availability versus volume traded.
It is therefore just a medium between traders where they can set limit orders to buy/sell Bitcoins for a certain price.
So, in the true approach of Debunqed, we will decipher crypto-exchange trading by looking at what you need to do to get into it, and what you stand to gain.
The first step would be to open a secure Crypto wallet to physically purchase (own) some altcoins. Bitcoin, Ethereum, and Litecoin are the main coins offered by Crypto wallet providers.
They hold the most value and can thus be broken down into smaller denominations (Altcoins). The same way the dollar is used as the main exchange for other fiat currencies. This example helps to put things into perspective.
Make sure you do your research into which wallet you will use. Obviously, if you are mining a certain Cryptocurrency you would naturally purchase them directly from that software provider of the Altcoin.
Using Ripple mining as an example, the platform is supplied by RippleNet and naturally, it follows that the Ripple company mines all the volume and controls its supply.
Getting the digital currency into a wallet can be a quick exercise.
It can take as quickly as between 5 – 20 minutes via a peer-to-peer Bitcoin marketplace connecting buyers with sellers like at Paxful.
Make sure you deal with reputable sellers. This wallet provider rates suppliers based on how reliable they are so only deal with sellers of the highest ratings.
The actual purchase (mostly conducted via online chat) can be made via a Credit/Debit Card, online banking or convenient money transfer facilities like (Europe-based) N26 Bank, Skrill or PayPal.
You can even purchase and send gift cards from Amazon for instance, to the seller (to the value of the currency being purchased) for the seller to release the Altcoins.
The actual coins are stored as an alpha-numeric key code – with the currency value in the wallet once acquired.
This after the wallet-broker takes a small fee for the transaction. This code/key needs to be kept secure – backed up online and offline (highly recommended). This is possible on special flash-drive (Crypto wallet) like the Trezor or a Ledger Nano. The device would hold the deposit key if you were transferring it to another wallet or to an exchange to trade.
The next step would be then to source a robust and user-friendly platform to trade your newly acquired currency on.
The best cryptocurrency exchanges would allow you to swap fiat currency such as dollar/euro for the digital currency directly. Naturally, you can trade one digital currency for another as well.
There are quite a few to choose from so it is good to read the reviews. You should then select one based on the number of deposit/withdrawal methods, the fee structure level, number of countries served, availability of security tools and features.
The last aspect is a huge determining factor: exchanges can be prone to hacking, or loss from outages. Lastly, their margins and exchange trading functions are good to observe too.
For serious and equally secure trading, you will likely need to use an exchange like Binance that requires the user to verify their ID before being opening an account. Make sure you have all your documents ready and up to date!
When it comes to the actual trading, let’s take a scenario where two people want to sell an altcoin but not for the market price. One sets a limit order for lower and the other for a slightly higher price. So, the best price to purchase Bitcoins, in this case, would be the median of the two prices.
If the buyer wants to purchase more than one altcoin, they will continually take the lowest price available. By doing this, the “price” of the altcoin will increase as the lower-price sell orders are no longer available.
You will then, as with Forex, purchase pairs of where you think your digital currency will be stronger against another e.g. BTC (Bitcoin) vs XRP (Ripple).
This combo would look like this on the exchange: BTC/ XRP – 0.00011960. What this means is that one Ripple coin is worth that much Bitcoin for instance.
This type of trading, like commodities or forex, requires constant attention and the monitoring of prices. But there are tools that can also help you set prices and have the trades auto-execute.
So, a platform which provides such tools conveniently allows you the time to do other important things. Like paying attention to your spouse, formal job or family and friends. That would be ideal.
If you have the cash, time, expertise and financial clout, it is even possible to run your own Crypto Exchange!
This is another benefit of a decentralized currency system that will allow you to earn some cash by charging for the usage of your robust platform.
Well, this may be until the fiscal authorities’ crackdown on all of the platforms with restrictive legislation.
ADVERT
I’m not quite sure if anyone has given some careful thought – in the heat of this ‘Crypto mania’. More specifically, have you ever considered the ramifications of the blockchain and its impact on the global economy?
This is an attempt to perform a calculated prophecy, based on the conversations we’ve had with like-minded visionaries.
An introspection into this ‘much-talked-about technology’ has led to endless possibilities.
Presently, every Tom, Anastasia, and Patel are pursuing short-term gains. You are all probably investigating ways in which they too can “cash in” by investing in new digital currencies.
This frenzy is mainly driven by how some of the altcoins are performing in value. Some digital coins are rising as much as 1000% in a ‘Crypto bull-run’. But the real appeal for digital “currencies” comes from the security, speed, and cost of transactions they facilitate.
Most of you are understandably looking at it solely from an investment point of view – after all, greed never sleeps.
Also, let’s not forget the anonymity it affords one – great for criminals and money launderers. Because of the increased risk, monetary authorities and regulatory bodies will make a case for tighter controls.
They may even push for the outright banning of this new currency altogether.
Retail banks, are currently entrusted with the movement of your funds (electronic transfers) and are governed by economic monetary policy. This happens under the watchful eye of big brother – the Reserve Bank.
These commercial banks are the “primary targets” so to say of the blockchain. They were, therefore, the first to react by investing or attempting to start up their own blockchains.
Such projects, however, prove to be expensive and still risky ventures given that no-one knows the source and destination of the blockchain.
Banks are nevertheless having to either make quick decisions about whether they get on board or partner with developers of Cryptos such as Ripple).
We also look at other financial institutions such as credit lending facilities and money transfer institutions. They are also are naturally in partnerships with the banks. They, however, stand to get wiped out by the blockchain if you think about it.
Really, who would want to cough up a 10% commission or a transfer fee for money sent abroad to your family? You could simply use something like IOTA which, by the way, is as a Crypto hovering around 3-5 USD (at time of publishing) per unit.
It is capable of transacting very quickly and securely with no transaction fees!
And how so you may ask? Those details are listed clearly on their respective websites.
It is the belief that the plan for Cryptos’ was to enable anyone to have access to a shared (decentralized) peer-to-peer type service that enables the secure transacting of literally – anything!
You can look at the blockchain working in the same manner as BitTorrent or E-Mule (for those who remember that far back). In the way, that data, albeit mostly bootlegged music, videos, and software, was distributed and downloaded on the web.
“Blockchain is essentially a quick peer-to-peer transaction of digital currency”
The value of Cryptocurrencies is now driven by how well it works as a system. You must look more closely at the added value it can offer society from a functional, practical, convenient, and of course, cost-saving perspective.
So, what does that then mean for companies like Visa, Mastercard, or even a digital banking app like PayPal?
You can also imagine the implications for investment banks and their traders. That is if markets such as the very volatile foreign exchange (Forex) are completely abandoned and substituted by Cryptos.
The purpose of ‘Cryptos’ running on the blockchain is, therefore, to change the way we transact and pay for goods and services.
The aim was to make it a ‘form of exchange’ but also to provide the resources for you to “mine” and own them. This can be an alternative income generator alleviating the need for job creation. It can also be a substitute vocation for those you who were perhaps made redundant by automation and AI.
So, once you mine the currency (provided you have the infrastructure and pay the overheads), you can use it to get the things you need or must pay for.
Your electricity bill, for example, can then be processed and paid for directly from an IOTA-holding wallet.
Speaking of electricity, we came across a very insightful article (referenced in the resource section) focusing on the impact of energy consumption that global rampant mining will cause the price of electricity and the environment.
Coupled with the switch to electric cars this could surely force you to invest in better ways to generate electricity. That is if we are to maintain sensible levels of sustainability.
Whether the price of electricity goes up or down will be determined by how quickly energy providers globally will be able to meet this surging demand.
We can surely be in a position to observe the upcoming impact on electricity consumption from next year.
More and more of the global population are beginning to mine altcoins for themselves.
As we head into the festive season and bonuses are being paid out, be responsible for how you splash out. Do your research first – even if it means waiting a year to see how it all plays out.
The implementation of globalization has not been without its major flaws. Abolishing it, however, is paramount to anti-socialist behaviour or looking inwards. This concept is against the tendencies of human nature.
If you read up on any definition of globalization, you will see that the intention was always genuine. The need to integrate and collaborate for the mutual benefit of nations.
It can, however, like any product (like knowledge), be exploited out of selfish desires and lead to exploitation.
Of course, it also doesn’t mean that globalization must apply to every sector of your economy. Some inward investment is always healthy. It should, however, not lead to extreme nationalism for a fear of loss of national identity.
The problem, like many others, lies in the hands of politicians who are controlled and dictated to by a handful of large corporations. These ‘corps’ have one and only self-interest – profit, power, and control.
The main concern for sovereign governments is that ‘giving up’ or sharing one’s technological, innovative, or manufacturing secrets to other countries. The premise is that this would make them ‘vulnerable’.
The real issue lies in a lack of trust – leading to the notion: “I will not let you know how I do it because you may use it against me – in trade or war”.
Despite the existence of supposedly ‘compartmentalized’ trading blocs and free trade areas like NAFTA, EU, ECOWAS, SADC, etc, the rate of globalization has sped up significantly in the past decade.
This is due to boundless advances in information technology as accurately predicted by Neoclassical Growth Theory.
Information technology has now given us valuable new tools to identify and engage in economic activity.
Tech provides access to and faster, more informed analysis of information, transfers of assets, and collaboration.
A globalized world means that with the aid of technology, you can buy and sell shares of an Italian firm from a desktop in Namibia!
You would then only have to deal with the commissions and transaction fees (capital gains tax) locally pertaining to your online trades.
And think about it, on a micro-level. If globalization is entirely a bad concept then no-one should be using Amazon, eating MacDonalds, or watching Netflix in protest. Hard to imagine, isn’t it?
We must praise its positive outcomes and work hard against the negative impacts. The negative ones are also giving rise to a new era of extreme nationalism or populism.
You can only do your bit by promoting and backing policy-makers who can enforce good trade laws. This would force both local and international competitors to play by the same rules.
Penalties for financial misconduct should be a lot greater to deter exploitation. Rather, perpetrators still get the proverbial slap on the wrist.
The creative destruction of the financial system will be brought about by cryptocurrency and its underlying blockchain technology.
Depending on its uptake, and whether the authorities can legitimize its legality, we may see individuals and governments using decentralized currencies.
The Venezuelan president is investigating the concept of a national cryptocurrency dubbed ´Petro´. They would use it to alleviate dependency on (heavily interest-ridden) loans.
When it comes to providing means of storing, sending, and receiving money, banks and their affiliated institutions, have enjoyed a monopoly for centuries.
They (especially central banks which allegedly are owned powerful families) have the authority to influence countries and their governments. We will not go into the level of control as this paves the way for conspiracy theories which though not proven – are not farfetched.
So, it’s only expected that when some new and unknown entity threatens their prosperity, they start to react.
How banks are responding is evident by how they are fervently building their own blockchains. This, however, defeats the purpose of a having decentralized system.
Bitcoin and cryptocurrencies get their appeal not just because they are very secure. But because unlike fiat money, they are not heavily regulated and can be mathematically restricted.
The 21 million unit limit on Bitcoin by default places it closer to the status of gold (which is also not infinite). But what happens when all are mined in 2041?
Bitcoin’s current ‘value’ of over $30 000 (adjusted), could move up again, according to the traditional laws of supply and demand as it becomes rare.
To unlock more value the creators will split it again. The first major splits (forks) gave rise to Litecoin and Bitcoin Cash. Both cryptocurrencies are racing to newer heights daily.
Now back to the banks – they make money from our deposits and these deposits are backed up by our reserve banks.
Reserve banks lend retail banks money which they essentially just print. The banks must ‘turn it’ and pay it back with interest (repo rate).
So, technically we ‘empower’ banks by depositing our money so they can invest the funds in all sorts of mechanisms. Such mechanisms include the credit and loans to you, your businesses, equities, and property.
Then, they also invest in high-risk investment vehicles like currency trading, derivatives (futures). They are essentially the biggest regulated and legal Ponzi-schemes. They also make a significant amount of the daily fees they charge you.
Let’s quickly put things into context. A bank with over a million customers transacting daily. Let’s say they charge you a 10 cent (conservative figure) transaction fee for depositing, withdrawing from another bank, or an intra-bank transfer.
They then make 0.10c x 1 000 000 = 100 000 units of the currency on the day. This equates to 1,2 million Euros, Dollars, Rands, or Yen annually. And that is just off your transactional fees!
Then they also charge you monthly service/maintenance fees. Those are to cover the convenience of you having an account and, for services like online banking.
This is what cryptocurrencies can potentially wipe away from banks we all go the digital currencies route. Granted, how you acquire and transfer Cryptocurrencies are not as straightforward as receiving paper money – yet.
That, coupled with the stigma around ‘Cryptos’, means there is still a barrier to entry for the ‘open-source’ monetary system.
Banks will try and bring about their own blockchains to address security concerns around making transactions. For them, however, it would still be business as usual when it comes to the charges.
Some newer financial institutions, however, are already progressing in the favour of you and me – one such is the European based N26 Bank.
We often end up paying for things all month without even having to go to an ATM. It works as a traditional bank would, however, allows the (smart) card to be used as a credit card (backed by Mastercard) would.
This allows you to quickly purchase goods online, book events, flights ticket, and accommodation. Basically, all things you still can’t do with your debit card.
In countries like Sweden and Estonia, card and digital systems have been a thing for a long time now.
Some of these Fintechs are adopting or partnering with Cryptos companies to deliver their services. One such as the relationship the one between a German bank and the crypto Ripple.
It would be interesting to see what governments and financial institutions do to ‘protect’ their payment systems. Likewise, it will be equally fascinating to observe how they adapt in general to the new digital era upon us.
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